In my former life (pre property developer) I worked in the
cosmetics industry. One of my claims to
fame was that I invented a whole new product category. A category is a group of products that have
similar characteristics. For example, when you go into the grocery store,
everything is categorized in aisles; so the cereal aisle will be made up of
categories such as mueslis, oat products, biscuits (eg wheat bix) etc.
My ‘invention’ was depilatory cream for men.
Yep, you heard right. Back then in the early 1990’s I was a young product
manager looking after a women’s wax and depilatory range. For those who may not know, a depilatory
cream dissolves the hair just below the skin’s surface so you get a smoother
result than shaving and it’s not as painful as waxing (ripping the hair out by
the roots sometimes causing ingrown hairs).
After some ‘in-depth’ research, I found that men were
starting to focus on hair removal. Not
just on their faces but also on their chests and legs. Some men would remove hair for sporting
reasons i.e. triathletes or swimmers, apparently making them faster but others had
started doing it for aesthetic reasons...apparently a bare chest accentuated
their muscles (not that I noticed).
How did I research this?
Back in the old days, I would occasionally
venture into the city and go to night clubs (with my now husband). OMG that was
so long ago now but boy it was fun. I
would see guys, mostly gay at the time or body builders (or both) dancing
around with no shirts on and with not much body hair. As I was managing a brand of hair removal
products I decided to conduct a little research (hoping I could tax deduct the
exorbitant door fee!) and ask the guys how they removed their hair. Funnily enough, they were more than happy to
tell me they were shaving or waxing and not happy with the results. I won’t go into any more detail here as this
is actually a column on property developing but least to say the light bulb
went on and I saw an opportunity in the market. I soon launched the first extra
strength depilatory cream for men and called Andre. If anyone has ever
used this product, I’d love to hear from you!
So what has men’s hair removal have to do with property
development?
Nothing really. The point
I’m trying to make is that this week I came up with a new development product
to fit into our established property development category. The new product slips in right between our
existing granny flat and dual occupancy development strategies. It’s filling a gap and I think a need in the
market.
I can’t really say
we’ve invented it as perhaps others are already doing it, but we’ve taken a
proven strategy; the build a granny flat strategy on existing property, to a
higher level. I'm calling it the 'new, new granny' opposed to the 'old, new granny.'
With the ‘old, new granny’ strategy we are finding
properties with an existing (old) house that is suitable to renovate and then
building a new two bedroom granny flat on the land. This strategy has been very
popular and the main benefits are:
-
It’s cost effective; about $360,000 in total
costs (in the Hunter Region of NSW).
-
High gross yield of 8-9%.
-
We add value to the house through renovation.
-
Usually the property is located in established
suburbs with good sales and rental history. The suburbs we choose have and
charm and character.
-
It’s quick, typical timeframe about 3 months to
complete.
This strategy appeals to people on a certain budget wanting
cashflow.
Our ‘new, new granny’ strategy sees us build a new house and
a new granny flat at the same time.
This strategy will be very popular as the main benefits are:
-
We can design the type of house we want to build.
-
Maximize rental return by adding rooms,
increasing the size of house or other features in demand.
-
Higher depreciation benefits are achieved.
-
Design to fit the granny flat rather than have
to work with position of existing house.
-
Appeal to higher income tenants looking to rent
new property and achieve higher rent.
-
Building warranty included for both new
dwellings.
-
Total cost around $520,000
-
Possible higher capital growth prospects
The difference is a lower yield for the ‘new, new’ strategy
of about 7.5%, but depreciation is higher so most likely a cash flow positive
result for the investor (depending on their taxable income). This strategy suits someone wanting more
depreciation and possibly higher capital growth potential as we’ll be building
these in up market land estates.
So, it was fun running the figures and seeing just where
this new development strategy would fit into the Property Bloom range of
developments we offer. We now have a
firm build estimate, some great land lots lined up and are ready to launch our
new product...I knew my marketing background would come in handy one day!
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